Goldman Sachs Sues Malaysia Over 1MDB Settlement

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Facts

  • Goldman Sachs on Wednesday filed a complaint in a British court for arbitration against Malaysia amid a disagreement over a 2020 settlement tied to the role of the Wall Street bank in the multibillion-dollar 1MDB investment-fund scandal, the biggest foreign bribery case in US enforcement history.1
  • This comes as Goldman argued that the Southeast Asian country has violated its obligations to appropriately credit assets against the guarantee provided in the agreement and to recover other assets, with Prime Minister Anwar Ibrahim urging the firm to honor its settlement earlier this year.2
  • Speaking at a business conference in Singapore last month, Ibrahim vowed to chase a new, tougher settlement from Goldman Sachs, calling the 2020 agreement unfair but refraining from saying that the government would file a lawsuit against the bank.3
  • In addition to paying $2.5B to resolve criminal charges over the 1MDB scandal — which reportedly saw over $4.5B stolen from the wealth fund — Goldman committed to helping recover $1.4B in assets, including $500M by August 2022. Failure to recover the agreed amount last year would lead to an interim payment of $250M.4
  • Charges against three Goldman Sachs units were filed in December 2018 for misleading investors, as the investment bank underwrote the 1Malaysia Development Berhad bonds in international markets, raising billions for the now-defunct state fund.5
  • Malaysian authorities denied Thursday the claims that it had breached the settlement deal, deeming Goldman's latest move 'premature' and stating that it would prepare its response to protect the interest of the Malaysian people.6

Sources: 1Bloomberg, 2FT, 3France 24, 4Associated Press, 5Al Jazeera and 6Reuters.

Narratives

  • Narrative A, as provided by South China Morning Post. Goldman Sachs has every right to demand arbitration in this case, as the government of Malaysia has, in bad faith, tried to take advantage of its asymmetrical power by demanding a new settlement with more onerous penalties as well as by not being transparent with regard to the recovery of looted assets.
  • Narrative B, as provided by Malay Mail. It's clear that Goldman Sachs has sued Malaysia only to divert attention away from its obligation to hand over the agreed $250M interim payment, as the company has failed to recover the stipulated amount of $500M two years from the signing of the deal. After an entire year requiring deadline extensions, apparently in good faith, Goldman has shown its malicious intention.